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The Business Case for Renewable Energy

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The triple bottom line - profit, people, planet - has been part of the business lexicon for over 25 years. Today, more than ever, “people” and “planet” are inextricably linked and organizations are being pulled in many different directions. With numerous potential initiatives, how do you convince executive leaders to prioritize sustainability as a business imperative within your organization?

 

Choose energy as a focus area

At an organizational level, where does renewable energy rank on the corporate agenda? Organizations often think of electricity as an overhead cost to be minimized but forward-thinking leaders understand it’s much more than a line item. 

Businesses can leverage renewable energy as a climate-positive business asset to mitigate price and regulatory risks. As the grid evolves and the global economy places more importance on climate change, the cost of carbon will become an increasingly important factor. The desire for energy security, price stability and reduced environmental impact makes effective energy management a critical piece of any sustainability strategy

There is no better time to capture the benefits of renewable energy and set your business up for success. 

 

Economic benefits

Since energy is a large variable cost, consider factoring it into your cost structure. CEOs tend to be more vision-driven while CFOs will want to see that renewable energy numbers make sense. Either way, show your leadership team what your proposed renewable energy projects will do for the bottom line. 

If your organization decides to prioritize energy as part of a bigger sustainability plan, rigorous economic analysis is often needed to justify the purchase. However, you don’t have to build the case for renewable energy alone. Our experts can partner with you to demonstrate how smart, renewable energy decisions can support your business strategy. 

 

Implementing efficiency solutions creates immediate savings  

There are many innovative technologies for monitoring and managing energy data in order to act on it. Energy efficiency tools are specifically designed to reduce the energy needed to produce the same output. Becoming more energy efficient not only lowers costs but also plays a significant role in combating climate change. According to McKinsey’s Global Greenhouse Gas Abatement Cost Curve, “energy efficiency represents around 40 percent of greenhouse gas reduction potential.” Energy efficiency solutions have tremendous dual potential to help organizations operate more sustainably and lower costs.

Sourcing renewable energy supply can save money

There is a fallacy that purchasing renewable energy supply is going to cost more or that renewables are a premium relative to grid supply. The reality is, renewables are often more competitively-priced than any other power-generating source available. Every year since 2012, more than half of new power put on the grid globally has come from renewable sources. According to the American Council on Renewable Energy, over the past decade, the average levelized cost of wind and solar energy has dropped 84 percent. Expanding the grid with a more diversified set of energy resources has the potential for greater price stability and energy independence. The ideal energy management approach will allow your organization to execute a renewable strategy for less than what you paid in the past.

The Return on Investment

Renewable energy and carbon reduction efforts also present compelling returns. The Carbon Disclosure Project (CDP) helps manage and measure companies’ environmental impacts. A CDP study found that “S&P 500 industry leaders on climate change generated 18 percent higher return on investment, 50 percent lower volatility of earnings over the past decade and 21 percent stronger dividend growth to shareholders than their low scoring peers.” Many sustainability leaders are even publishing savings from renewable energy contracts. The City of Pittsburgh’s renewable energy agreement will save around $100,000 and the City of Houston estimates switching to 100 percent renewable energy will save $65 million over seven years. Point to undeniable potential gains like these, as you look for executive support to invest in sustainable power. 

 

Social benefits

If your organization manages energy spending better and more proactively integrates renewables, it will have a significant competitive advantage in the marketplace. Those savings can add to your profits or be utilized for any of the positive things your organization does to generate goodwill. 

 

Environmental efforts, customer preference and employee engagement

If your competition is buying renewable energy and has a sustainability plan, that gives them an advantage when attracting employees and customers. Prioritizing environmental sustainability helps recruit and retain top talent, as 64 percent of people would not take a job at a company without strong corporate social responsibility values. The same goes for consumers. A Futerra survey found that 88 percent of consumers want brands to help them live sustainably. Sharing an impressive renewable energy strategy will help demonstrate your environmental commitment to your employees, customers and community.

Reputation and brand recognition

Making renewable purchases and sharing your sustainability story can also elevate your brand and increase sales. If your company spends five percent more to buy renewable power, but it creates more customer goodwill that drives more sales, that's the cost-benefit of a renewable purchase. For example, universities that make sustainability commitments hope to differentiate themselves from competitors and attract more students to their institution. In highly-commoditized markets like fashion, consumers have endless choices and a lack of climate action presents a real exposure. Since the clothing industry is also a top polluter, many shoppers seek more ethical brands. No matter what your industry, consider implementing renewable energy solutions to drive customer buy-in and increase profits. 

 

Environmental benefits 

Most high performers in the c-suite are aware of the risks of climate change to business viability. The political atmosphere on climate change is in flux and at times divisive. However, it is extremely important to contextualize how renewable energy can help create a more resilient and commercially stable future. 

 

Be proactive, not reactive

As the leading cause of air pollution, power generation has a target on it. Linking power generation to poor air quality and negative health outcomes is going to be a catalyst for regulatory changes as well as shifts in the voluntary market. Forward-thinking energy strategists anticipate that, sooner or later, nations will move to advance energy transitions through legislative mandates. 

In the U.S., carbon poses real cost risk as states enact more aggressive emissions targets. In New York, the independent system operator NYISO has a carbon pricing plan that creates challenges for businesses reacting to the latest zero-carbon energy goals. As the policy landscape continues to shift, other state mandates to cut emissions and spur renewable energy development are not far behind. Forty percent of the world’s emissions are already under some form of carbon pricing and more states are adopting clean energy standards. 

Being aware legislative risk will help avoid being on the wrong side of local or national policies with a difficult road to meet new mandates. Rather than waiting for new carbon regulations to come downstream, businesses can switch to renewable solutions and decarbonize on their terms. Designing an energy roadmap with the future in mind will help your organization move first to reduce regulatory carbon cost risk.

 

Prices for Selected Carbon Pricing Initiatives

 

With climate change impacts and the increasing likelihood that legislation will require organizations to pay for their emissions, more businesses are setting an internal price of carbon (IPC). Carbon pricing measures the potential impact of CO2 emissions to better understand exposure and guide business decisions. For example, British Petroleum recently set their IPC at $100/ton. If they can cut back CO2 emissions through efficiency or renewable energy, then they can use their IPC to calculate total savings. Factoring in carbon costs allows businesses to assess CO2 mitigation decisions and make the most of renewable investments. 

 

Create a more resilient business model

Climate change poses a significant threat to life as we currently know it. In 2018, the U.S. sustained $91 billion in damages from hurricanes, severe storms, floods, droughts and wildfires. Many global business leaders are concerned about the steep cost of global warming. A report from the Climate Disclosure Project found that 215 of the world’s biggest companies, including Apple and JPMorgan Chase, see climate change as a threat to business over the next five years, with a cumulative cost of a trillion dollars .

These steep cost projections are one of many reasons to consider implementing sustainable solutions like increasing efficiency and sourcing clean power. According to the American Council on Renewable Energy, the private sector in the U.S. has invested $448 billion in renewable energy over the past ten years. Diversifying with multiple energy sources creates a more resilient system that helps protect energy customers from market volatility, promotes sustainable development and helps mitigate climate risk. 

 

Implement clean energy solutions

Making eco-conscious business decisions today will drive growth, create long-term value and safeguard future profitability for your organization. When you demonstrate the value of renewable energy to your leadership, you can begin building an energy plan that will create a better future for your business and the planet.

Posted: August 05, 2020

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